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March 01, 2016 12:00 AM

New Wisconsin law gives municipal employees more retirement plan options

Barry B. Burr
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    Wisconsin municipal employees will have more choices in retirement programs under legislation signed into law Monday by Gov. Scott Walker.

    The law allows existing municipal employees to choose whether to stay in their existing retirement programs or join the Wisconsin Retirement System when their employer elects to join WRS. Employees hired on or after the date the employer joins the state pension fund will automatically become participants in the WRS.

    Under the previous law, all employees regardless of when they were hired became WRS members when their employer joined the state pension fund.

    Vicki Hearing, communications managers of the Madison-based State of Wisconsin Investment Board — whose $97.6 billion in total assets includes overseeing the investments of the $89.2 billion WRS — deferred to the Department of Employee Trust Funds for details about the impact of the new law.

    The new law “may result in an imbalance in the WRS participant structure that could, in turn, result in added short-term costs to (its) fund,” according to a Joint Survey Committee on Retirement Systems report on the legislation, SB 134. But “due to the relative size of the WRS participation, the number of municipal employees that are likely to elect to participate … is expected to be negligible.”

    The WRS has a combined 600,000 active, inactive and retired participants, Ms. Hearing said.

    The choice could result in increased participation in WRS from employees who benefit more than by remaining in their existing programs at the municipality, while those who would not benefit as much stay out of the WRS, the report said.

    The imbalance would be the result of “negative selection bias” on the part of municipal employees having a choice and has a potential to increase WRS costs, the committee report said. The negative selection bias means “that allowing employees to elect participation would likely result in an increase in participating employees who would benefit the most from the WRS, rather than a random sample of all … employees added,” the report said.

    The Department of Employee Trust Funds, which administers the WRS benefits, estimated the new law “would not have a material effect on the department's operating budget,” according to a fiscal estimate filed for the legislation.

    Mark Lamkins, ETF communications director, was unable to provide more details by publication time.

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